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Influential Panel Eyes Medicare Drug Payment Recommendations

By Kerry Young, CQ Roll Call

September 29, 2016 -- An influential panel of congressional advisers intends to develop a package of targeted recommendations to address Medicare's rising drug costs, with an aim of helping lawmakers in their struggles to address the nation's pharmacy bills.

"By the spring, we will come out with some formal recommendations, hopefully about the time that Congress is ready to take on some of these difficult issues," Medicare Payment Advisory Commission (MedPAC) Chairman Francis J. Crosson said Thursday at a conference sponsored by CAPG, a group that advises physicians.

Members of Congress are facing increasing pressure to act on rising drug prices that strain many family budgets, as seen most notably in the recent outrage about Mylan N.V. charging $600 for a two-shot package of the EpiPen rescue drug for severe allergic reactions. Spending on medicines in the United States rose by 8.5 percent last year to $309.5 billion from the previous year, according to consulting firm IMS Health.

Thursday brought a fresh flurry of news on drug costs. Democratic presidential candidate Hillary Clinton called for steps in rein in drug prices in an article in the New England Journal of Medicine. Health and Human Services Secretary Sylvia Mathews Burwell echoed Clinton in calling for allowing the federal government to negotiate prices for certain drugs at an event hosted by the Atlantic, according to press reports.

Also on Thursday, the Kaiser Family Foundation released a report showing strong support in the American public for federal action on drug prices. About eight in 10 Americans surveyed favor allowing the government to negotiate with drug companies to lower the prices of medicines for people on Medicare, the nonprofit group said. Their polling also indicates that about two-thirds of people would support the creation of an independent group that oversees the pricing of prescription drugs.

Clinton supports this approach. In the New England Journal article, she called for a new federal "consumer response team charged with identifying excessive price spikes in long-standing, life-saving treatments." The New England Journal of Medicine said Republican presidential candidate Donald J. Trump didn't respond to its request for his comments on health policy.

'Flak Jacket'

MedPAC's recommendations likely will be closely watched in discussions about drug pricing, especially if the panel can suggest potential savings. Lawmakers in recent years have several times turn to Medicare as a source of offsets for other legislation. Last year's budget deal (PL 114-74), for example, included about $9.3 billion in savings over a decade from a change in payments for certain services delivered by doctors' offices owned by hospitals. MedPAC had long supported this shift, which addresses cases in which Medicare paid more for identical services if they are performed in a doctor's office owned by a hospital than if delivered in an independent physician practice.

Often, the panel's recommendations can serve as a "flak jacket" for lawmakers as they move to reduce Medicare payments to politically powerful segments of the heath care industry, Dan Mendelson, president of Avalere Health, told CQ earlier this year.

MedPAC in June offered suggestions to Congress on steps to rein in the rising cost of Medicare's Part D pharmacy plans, which last year spent about $90 billion last year. MedPAC said a combination of steps that might save about $10 billion over a decade. These include allowing the insurers who run Part D to narrow the number of antidepressants and drugs to prevent transplant rejection they cover. MedPAC also recommended scaling back a financial safety-net for insurers when their customers have higher-than-expected pharmacy bills, arguing that it would increase the incentive to negotiate lower prices.

MedPAC will delve into deliberations for further recommendations at a meeting next week, Crosson said. These discussions likely will continue over the next several months. Possible topics include payment for drugs covered by Medicare's Part B outpatient program, which handles bills for services provided in doctors' offices, he said.

Medicare officials separately already have put forward a proposal for a five-year test of alternative Part B payments for drugs, angering the pharmaceutical industry and doctors' groups. Medicare pays more than $20 billion a year for Part B drugs. Medicare has not said when it will release a final version of the Part B payment test, which it first unveiled in March, but lobbyists speculate that its publication could come soon.

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